The Nation Newspaper Naira rising slowly, steadily!
According to received wisdom out there, the naira is bouncing back in a manner of speaking, thanks to the plethora of policies being implemented by the apex bank.
Tinubu at the forum acknowledged the challenges faced by the business community in the financial markets and assured them of additional foreign exchange liquidity to restore market confidence. From available information, the CBN reportedly settled some of its FX obligations with certain banks such as Citibank, Stanbic IBTC, Standard Chartered, among others. This move seemed to have added some impetus to the naira.
The bank impressed on its customers the need to liaise with their respective Relationship Manager or Trade Service Professional for clarification on the matter. The source added that paid banks represent a small percentage of outstanding FX forwards with the largest percentage mostly in tier 1 banks yet to be settled.
The association comprising all corporate treasurers in Nigeria in a statement obtained by our correspondent said the action demonstrates the apex bank’s commitment to ensuring the ease of doing business and reducing uncertainty in the market. The Director General of the Nigeria Employers Consultative Association, Mr Wale Oyerinde is also on the same page with Ogunnubi.According to the NECA boss, the actions of the new administration of the CBN have shown tremendous improvement in the FX management.
“But if this move is well implemented, it could be an initiative that could be done in such a way that it will be an improvement in the system. But I will tell you that for every step the CBN takes the big elephants in the house are always there to truncate it and if the CBN is not careful the big elephants will also truncate this move that they are about to make. The big elephants I mean are the commercial banks.
In what may have become a positive reawakening, the naira has risen to N1,120 against the dollar as the foreign exchange market reacted to news that the CBN has begun to clear some of its FX backlog on Thursday. Also the president of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, confirmed that the dollar closed trading at N1,120/dollar on Thursday.He said, “It is closing at N1, 120. Even yesterday it came down to N1,150. Today, it started at N1,170 but it is closing at N1,120. Yes, this is because of the CBN’s move to clear its backlogs. There is a kind signal in the market. The CBN should continue to make clarifications.
This is even as JPMorgan expects Nigerian authorities to maintain a willingness for greater flexibility of the exchange rate. Though it said that while a strengthened naira against US dollar exchange rate is crucial, “the large backlog of unmet FX demand and low net FX reserves makes the job challenging”.
“In our opinion, when authorities refer to the FX backlog, they are actually referring to US $6.8billion in FX forward commitments which the central bank has not honored – the majority of which has been covered by commercial banks. “The ability of the government to raise such amounts via these channels may be challenging given the US$3bn expected from Afrexim has been delayed for months, while Nigeria LNG Limited’s historical dividends to the government have fallen well short of US$2bn annually. It also doesn’t help that the NNLG Managing Director recently confirmed that the company is operating at 50% capacity on its Train 1-6 fields and plans to expand its processing capacity with Train 8 is no longer feasible.
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